Fayette Schools’ $40 Million Windfall: Don’t Count on It Every Year

Recently I wrote about a recent FCBOE meeting where Dr. Patterson noted that the board should expect the collection on approximately $40 Million from the new during fiscal 2027. Data Center Money a Windfall for Fayette Schools—Now, What to Do with $40 Million this Year? | The Citizen Now as Mr. Paul Harvey would say, here is the rest of the story.

The data center tax windfall reported is not for the building but rather the computer equipment located in the building. For some reason, the building has been granted a tax abatement for a period of time. The ad valorum tax is applied to the equipment at the same rate as real property.

However, in year two, the computer equipment value is depreciated, it will be worth less in years two and three as computer equipment is depreciated over a few years, typically either three or five by class. The chart below illustrates the declining tax value on a hypothetical basis using three year depreciation. Practice shows that the equipment will have multiple depreciation lives, generally three to five years. As I wrote earlier, the real question happens to the computer equipment in year 4.

First, the company may buy the exact same equipment for the exact same price. In that scenario (A), the company would then pay fourty million dollars in tax. However, we have all replaced computers over time, and in my experience, the newer computer is more sophisticated but lower priced.

In that scenario (B) the equipment is replaced with better equipment at a lower price, thus results in less tax due to a lower purchase price. Last, the company decides to squeeze another year out of the equipment, which would result in no tax on fully depreciated equipment in year 4.

Therefore, a single tax abated building does not provide a stable source of funding. We can see that QTS is building a small city of data center buildings so maybe once more buildings are occupied, that there should be a more sustainable stream of tax funds. Afterall, Project SAIL offers Coweta County a bountiful harvest after only twenty years.

However, the question is how to address a source of funds that is considerable but less stable in the short term. History shows us that when the local governments generate new funding sources, our legislators at the State of Georgia often adjust(reduce) their funding to the local government. So there are a lot of variables to consider when making decision on how the FCBOE handles these new funds.

Some will insist on applying this new funding to property tax reductions. At this point, you can’t use all $40 Million because, as we see above, the funding will be less in years 2 and 3. In the facebook comments for the last column, some suggested FCBOE use the “found money” for an aquatic center. I disagree with this approach. ESPLOST funds are for capital items and property taxes fund the operation of schools.

I have every confidence in the finance team at FCBOE that will provide the information necessary to develop practical solutions that provide for the variability of this funding. Taxpayers need to stay engaged with FCBOE board members to make sure they understand the opinions of the public.